Collective borrowing would help Spain through the crisis, reducing the pressure to make immediate hefty cuts to lower its deficit. But Germany is still refusing to embrace eurobonds, with finance minister Wolfgang Schäuble saying this evening it would be a mistake to launch them nowm as it would:

ignore lessons from the crisis that liability and control mustn’t be separated.

With Spanish 10-year bond yields finishing the day at 6.5%, well away from the 7% danger zone, there's less pressure for Berlin to change its view.

Our Madrid correspondent Giles Tremlett reports that a total of 76 people sustained injuries during the clashes in Madrid.

Here's a preview of his news story from the scene:

They came with helmets on their heads and the worried look of men with no future on their faces. But the Spanish coal miners who marched through Madrid on Wednesday were clear that they would not give up on their life-or-death struggle for the future of their collieries.

“We’ll keep going, and if nothing happens the fight will just get harder,” said Jorge Expósito, a helmeted miner from Mieres, northern Spain, as fireworks crackled and twitchy riot police stood by with shields and guns loaded with rubber bullets.

A tense stand-off saw occasional police charges, rubber bullets and demonstrators hurling objects at police. Some 76 people were injured in clashes along Madrid’s central Castellana boulevarde, but the three week miners’ march on Madrid eventually ended with nothing more violent than a rousing sing-song.

The miners had brought with them the dust of Castile — the sun-baked central region of Spain that more than 100 of them had walked through on their 400km march to reach the capital. Many had wept when they were greeted by crowds of supporters in Madrid.

We've getting a clear picture of events in Madrid now, with new info from the Spanish police, who say that:

• seven people were arrested

• 22 demonstrators were treated for injuries at the scene, with six taken to hospital. Ten officers were treated at the scene, with 2 taken to hospital (a hospital spokesman told Associated Press)

Based on a few reports from the ground, it appears that the protests began with miners letting off firecrackers (see 14.29 for a photo) as they marched to the Spanish industry ministry; with AP reporting that some fireworks were thrown at the police riot vans guarding the building.

Some witnesses have said that police fired indiscriminately, while others say they first aimed at the ground, before firing at the crowd after fireworks, rocks, and bottles continued to be thrown.

Here's a few lines from AP's latest take:

Protester Santiago Oviedo, 24, a physics masters candidate, said he saw protesters hurling fireworks, bottles, cans and rocks at police outside the ministry and that the protesters threw more objects after officers fired at the ground. The volleys then fired by officers at protesters sent many running into side streets. As fighting broke out, some people were beaten by officers wielding batons, and Oviedo said he saw at least 10 people hit by rubber bullets.

Today's clashes in Madrid are the most serious protests we've seen in the eurozone for a few months, I think. Listen to the quotes from some of the miners in Spain, and you might conclude that further clashes are likely.

Carlos Marcos, 41, told Reuters that the government must reverse its decision to cut mining subsidies by almost two thirds:

We're only asking that they cut 10 percent instead of 60...If they don't pay attention to us, we'll be back - with dynamite.

Here are more photos from wire reporters in Madrid, during the protests in support of Spain's miners.

Riot police agents holding a barrier thrown during today's demonstrations in Madrid. Photograph: Javier Lizon/EPAProtesters clash with riot police agents during the demonstation held to support the coal miners today. Photograph: Javier Lizon/EPAA man is tended to by police after collapsing during a demonstration by Spanish coal miners on July 11, 2012 in Madrid, Spain. Photograph Denis Doyle/Getty

Looking back at this morning's €65bn Spanish austerity package: Nicolas Lopez, director of analysis at M&G Valores in Madrid, is disappointed that Mariano Rajoy didn't announce new structural reforms alongside his tax rises and spending cuts (which are likely to drain growth out of the economy).

Lopez added, though, that Rajoy was rather constrained by the Spanish financial crisis:

It's not that much about measures to boost growth, obviously it will be the contrary, but rather simply to avoid bankruptcy.

Latest report from Madrid

Reports have come in that Spanish police fired rubber bullets during the protests in Madrid, sending demonstrators racing for cover. The incident may have been prompted by some protesters throwing objects, including firecrackers, towards police lines.

Associated Press has quotes from the scene:

Olvidio Gonzalez, 67, a retired miner from the northern Asturias region, was hit in leg by a rubber bullet Wednesday and fell to ground.

Rescue workers took him away on a stretcher. A huge, round, bloody welt marked the spot where bullet hit.

"We were walking peacefully to get to where the union leaders were speaking and they started to fire indiscriminately. There was no warning," Gonzalez said.

According to Spanish police, at least two people were injured in Madrid during today's clashes, with three individuals arrested.

A police spokesman said:

There was a police charge in front of the industry ministry and as a result three people were detained.

He also said that some demonstrators had thrown stones and bottles at police. Our photo from 14.01 shows a confrontation between riot police and demonstrators, at least one of whom appears to be bleeding. And here's another image:

A woman is arrested by riot police during a demonstration by Spanish coal miners on July 11, 2012 in Madrid, Spain.

Dario Perkins, City analyst at Lombard Street Research, has slammed the Spanish government for its decision to impose €65bn of austerity on a shrinking economy.

Perkins called it a "killer" blow:

Spain announces another €65bn of budget cuts spread over the next two years, despite clear evidence that austerity is making its situation worse. Just when you fear sense and pragmatism might prevail, European policymakers resort to type and order is restored.

Speaking of the budget … a couple of readers – including arnois and RoyalTurkey – have critised me for saying that public sector workers are losing their "Christmas bonus". That's the way Mariano Rajoy's comments were generally translated. but in truth staff are getting a straight salary cut.

A public worker in Spain, like me, has his salary divided into 14 parts. 2 are paid in June and 2 are paid in December, the rest are paid montly. The second part in June and December is called "paga extra" and this is an administrative trick that allows the government to not pay it when it feels like it, but it is wrong to call it a "bonus".

Angelino Alfano, secretary general of Berlusconi's People of Freedom party, has told reporters in Rome that the former prime minister should certainly run again. He said:

There is a great movement of support for Berlusoni. So many people are asking him to stand again, and I am among them.

As reported at 11.22am, 75-year-old Berlusconi has reportedly revealed that he plans to take part in next year's general election. This follows Mario Monti's refusal to consider staying on beyond his original mandate.

Also in the FT, Francisco Longo, professor of governance and public affairs at ESADE business school in Barcelona, argues that today's austerity measures fundamentally change Rajoy's relationship with the Spanish people:

Rajoy has effectively today changed his contract with the Spanish electorate. These reforms are completely contrary to his pre-election programme, and could have an important political cost for him.

He has an absolute majority, but we have seen in other countries that even governments with absolute majorities can fall quickly.

The Greek government had been blasted by opposition leader Alexis Tsipras for not playing hardball at the Eurogroup meeting of finance ministers earlier this week.

Tsipras, leader of Syriza, condemned the finance minister, Yannis Stournaras, for making such an unsplashy debut on the eurozone scene. He told Mega TV that:

It's unbelievable. He didn't ask for anything.

Stournaras confirmed yesterday that he didn't make any demands, but said he had won pledges of support – particularly over a €3.2bn bond repayment due in August.

There had been rumours from Athens this morning that his own side wasn't too impressed either. The Greek newspaper Kathimerini reported that Evangelos Venizelos of Pasok (a former finance minister, of course) had criticised Stournaras and demanded a clear-the-air meeting.

That has since been denied by Venizelos. The coalition government is meeting today though to discuss events. More here

Shipyard workers demonstrate outside the finance ministry in Athens, Greece, protesting against changes in working conditions, on 10 July 2012.

As the picture above (from yesterday) shows - Greece has also seen workers protesting this week over the country's financial programme.

An update on the coal miners' protests in Spain – miners have marched up Madrid's main avenue in protest at the government's decision to cut subsidies to the industry by 63%.

Some of the miners have walked for more than two weeks to Madrid from the autonomous regions of Asturias, Castilla Leon, Castilla La Mancha, Andalucia and Aragon.

Associated Press has a good story; here's a flavour:

The miners, wearing hardhats and carrying walking sticks, walked with relatives and sympathizers under a hot sun, surrounded by huge puffs of firework smoke.

Coal miners on their march to the Ministry of Industry today. Emilio Naranjo.

AP continues:

Miner David Menendez, 30, from the Asturias region in the north, came down by bus with relatives and fellow miners. He has worked in the pits for 10 years and fears losing his job in an economy with few prospects for anything else. He wore a miner's hard hat and a black T-shirt that read "Proud to be a miner" on the front and "The miners' struggle" on the back. "I'm here to defend my work," Menendez said.

The yield on the Spanish 10-year bond has dropped by 13 basis points to 6.694% (from 6.83% last night). Further away from the danger zone.

Nicholas Spiro of Spiro Sovereign Strategy reckons that Spain is getting credit for realising the "importance of credible banking reform". But the wider situation is still deeply troubling.

He splits recent developments into three:

The good:

Ever since the Rajoy government agreed to appoint external auditors to inspect the loan books of Spanish banks, the credibility of banking reform in Spain has improved. More importantly, there's now a recognition on the part of eurozone policymakers that sovereigns under stress cannot credibly underwrite vulnerable banks. We believe the rescue package for Spain's banks is the much-needed catalyst for a definitive clean-up framework for the weakest parts of Spain's banking sector.

The bad:

The creditworthiness of the Spanish sovereign remains under huge pressure. The Spanish bank bail-out has been handled extremely poorly by eurozone policymakers even before the aid has been disbursed. For the time being, the rescue loans will be piled on to the Spanish sovereign's increasingly weak balance sheet. The timing of, and conditions attached to, the direct recapitalisation of banks in the eurozone are still shamefully mired in uncertainty.

The ugly:

In our earlier notes, we warned of the danger of "conditionality creep" in Spain. This is now setting in. The policy conditionality in the banking sector will be extensive and more intrusive than anticipated. There will be a "troika presence", with Spain forced to cede significant regulatory and supervisory control over its banking sector

Politically speaking, the policy conditionality in the banking sector is a severe blow for the Rajoy government as it comes just as further austerity measures have been announced, including a politically perilous hike in VAT which Mr Rajoy had previously opposed. The risk for the government is that Spaniards perceive the conditionality as economy-wide. The average Spaniard is unlikely to differentiate between domestically driven and externally imposed policy measures, particularly given the external pressure on Spain to comply with the eurozone's fiscal and economic rules.

The European commission has welcomed Spain's austerity measures, calling them an "important step".

I presume they mean forwards – although Megan Greene at Roubini, for one, fears it could go the other way (see 10.24am).

The EC also said it was "working on the principle that private sector distribution" of the losses in Spain's banks will be needed, but that depositors and senior bondholders will not be involved.

So, as feared last night, this means that tens of thousands of citizens who hold preferred shares and subordinated bonds will be hit – and perhaps wiped out.

There's a good explainer about this issue here on FT Alphaville this morning (as usual!). It flags up the argument that while governments have a duty to protect depositors, that does not – and should not – include investors. A fair point, except that many small investors believe they were missold the products.

Meanwhile, there are reports from Italy that Silvio Berlusconi has decided to make a bid to become prime minister again, when Mario Monti steps aside next year.

Good news for the media, but for Italy? …

John Hooper reports from Rome:

Corriere della Sera is carrying a story this morning that Silvio Berlusconi has made up his to run again for prime minister in the Italian general election that has to be held by next spring. Polls he has commissioned reportedly show his party could not get more than 18% of the vote without him, but that its share of the poll would soar to 30% if he did stand.The TV mogul was said to have cancelled his holidays to prepare for the re-launch of his party in the autumn. And, Corriere said, he was planning to present a "shadow cabinet" composed entirely of people under 50.That might make it more appealing to younger voters. It might also distract attention from the fact that Berlusconi will be 81 when the next legislature comes to an end.The report was published on the day after the media tycoon's successor, Mario Monti, said equally definitely he would not run. Thirty percent of the vote might not get Berlusconi's party a majority of seats, but, if not, it would certainly hold the balance in the next parliament.All this is unlikely to go down well in the markets. In the eight years that Italy was governed by the chirpy billionaire, its economy barely grew at all. And his reluctance to introduce structural reform was the chief reason why he was ousted from power last November.

Silvio Berlusconi, last week.

I wrote yesterday that Mario Monti's departure was seen as a political risk, as his appointment as technocratic PM last November had helped to calm the crisis.

Duncan Weldon, the TUC's senior policy officer, called me up on this – pointing out that political risk could be just another name for "democracy". It's a fair point – for all his (alleged) sins, Berlusconi was elected.

Duncan's also an economist, and fears that Spain's latest austerity plan is a "crazy" idea during such a steep recession:

Spain's miners are taking their protests against the government to the heart of Madrid today.

More than 8,000 have been on strike since the end of May, and many have walked from their homes to the Spanish capital. Unions are hoping to get a turnout of at least 25,000 when they demonstrate outside government buildings later.

This video, based on exclusive interviews with some of the men, explains that they fear their livelihoods are at risk.

The miners have become a symbol of public anger against Spain's austerity plans. The government, though, insists is must cut back on the subsidies it gives to the mining industry.

And Ben Critchley of IG Index warned that the cuts come at a bad time for the eurozone:

Companies across the board are expecting continued difficult times, as we continue to wait for a real solution to be crafted by eurozone politicians … while Spanish prime minister Mariano Rajoy was busy this morning, unveiling new austerity measures that will amount to €65bn in cuts.

This runs the risk of deepening Spain's already significant recession, but Mr Rajoy has to embark on these measures if he is to retain the support of his European partners.

Mariano Rajoy has now finished speaking, and received a standing ovation from his own deputies.

Those MPs needn't fear the wrath of the electorate, for a while anyway. Rajoy enjoys an absolute majority, meaning he can announce tough measures without endangering his short-term future. Elections are not due for almost four years.

Mariano Rajoy's announcement this morning of €65bn euros of cuts and tax hikes over the next two and a half years may prove a key moment in his career as prime minister – with a similar barrage of measures two years ago marking the beginning of the end for his socialist predecessor, José Luis Rodríguez Zapatero.

Rajoy has reminded parliament that he came to power eight months ago promising tax cuts and that he has now delivered hikes (having also raised income tax and business tax earlier this year).

"I am applying exceptional measures to exceptional circumstances," he said, pointing to the unsustainable 7% interest rates being demanded by the markets. He also warned several times in his speech that an end to Spain's problems would not come quickly – in other words Spain is in for a long period of economic difficulties (something the 24% of unemployed already know) as it struggles to find exit recession and save its banks.

Mariano Rajoy went on to announce that the Spanish government plans to cut €3.5bn from public spending through a series of measures, including cutting the number of local lawmakers.

He also vowed to "drastically reduce" the number of local public companies. And in a sign that the Spanish civil service could face the axe, he pointed out that the number of people in public jobs has grown by almost 290,000 since the crisis began.

It's clear that the decision to give Spain another year to hit its deficit targets will not spare its people from further austerity.

There is speculation this morning that Mariano Rajoy will announce a rise in Spanish VAT rates, as well as cuts to social security and unemployment benefits, in an effort to bring the deficit down. Public workers could also lose their traditional festive payment too.

As AP explains:

Rajoy has already approved a series of tough financial and labor reforms since taking office last December. New measures being studied include a raise in taxes on goods and an increase in working hours and the scrapping of a customary Christmas payment for civil servants.

European stock markets have opened lower this morning. Traders are edgy ahead of the publication of minutes from the latest meeting of the Federal Reserve tonight. The minutes will show just how worried the Fed was about the US economy when it voted to extends Operation Twist bond-buying programme last month

Andrew Taylor of GFT explains:

The board’s decision to extend Operation Twist can only stem from immediate concerns that require this type of action. Just how dovish will determine the level of market action that will take place post release. This should see the QE3 cheer squad (pom poms and all) out in force and doing their bit by providing support for risk assets. This may create a nice opportunity to fade the buoyant moves considering that we are still three weeks away from the next FOMC meeting.

The FTSE 100, German Dax and French CAC are all down around 0.5% (with the FTSE 100 losing 31 points to 5632).

Mariano Rajoy's speech to parliament this morning is eagerly awaited – because other EU leaders have already told him to deliver a convincing two-year blueprint of structural reforms. As we reported last night, a draft memorandum of understanding lays out that Spain must deliver further spending cuts and tax rises before August.This plan could wipe out the savings of hundreds of thousands of ordinary Spaniards, experts fear. As my colleague Giles Tremlett explains:

The memorandum places a timebomb under what the Spanish consumers' association Adicae estimates are some €30bn invested in subordinated preference shares by retail customers at local banks – many of which have since been swapped for almost worthless bank stock.

The memorandum states: "Banks and their shareholders will take losses before state aid measures are granted and ensure loss absorption of equity and hybrid capital instruments to the full extent possible."

A savers' revolt is already brewing in Spain among those who bought preference shares and junior bonds, amid claims that they were misled by local bank managers who sold them as risk-free saving products paying up to 7% interest.

Good morning, and welcome to our rolling coverage of the eurozone financial crisis.We'll be focusing on Spain this morning, whose prime minister, Mariano Rajoy, is expected to outline further austerity measures to the Spanish parliament this morning. Rajoy is likely to explain that further cutbacks and tax rises are needed, in return for the country's banking bailout.We think Rajoy will begin speaking at 10am local time, or 9am BST.Public anger in Spain over his austerity plans remains high – a group of protesting miners will hold a demonstration in Madrid today, and urge a change.We'll also be monitoring the fallout from the Eurogroup meeting earlier this week. There was optimism yesterday that the eurozone had made some small progress, but shares are likely to fall back this morning.

Incidentally, regular readers may notice that the blog looks a little different today. I'm using some new publishing tools for the first time which will improve our live blogging (once I've got the hang of them!).